1/20/2010 @ 6:31PM

Understanding Dubai

“Get lost,” a young Emirati woman howled at me as she snatched the cab I had hailed on Sheikh Zayed Road in Dubai. “Go back where you come from!”

After living in the U.S. for over a decade, my husband and I were considering moving to Dubai. The emirate’s dual charm of being a plane hop away from Pakistan, the country I was born in, and having a cosmopolitan lifestyle in a Middle Eastern setting reminiscent of Saudi Arabia, the country I spent my childhood in, were great attractions–in theory. However, after spending one summer working in Dubai, in 2008, I was ready to go back anywhere I had come from. I didn’t love it there, yet the tiny desert state’s inherent East-meets-West contradictions and startling accomplishments continue to provoke and amaze me.

Dubai is not a democracy. Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s emir, is the 10th ruler in the Al Maktoum family lineage. He was hand-picked by his father, who ruled the state for 32 years. Since the 1580s the heads of the Al Maktoum family have designated their most able male offspring to replace them, with no possibility that any ordinary citizen could endorse, depose or run to replace them. They govern through royal decrees, which range from appointing crown princes to establishing efforts for environmental or financial sustainability. Every decree, as I saw during my summer in Dubai, creates rapid, sprawling waves across the public and private sectors throughout the state, with no counter-ripples in sight.

Dubai also cannot be proclaimed an unadulterated capitalistic society based on a free-market system. Granted the state’s free economic zones, including Dubai Internet and Media Cities, contain more than 6,000 commercial businesses, many of them 100% foreign-owned. Yet Sheikh Mohammed himself is the founder, part owner and lead visionary of virtually every major local company, including Emirates Airlines, the region’s most successful air carrier, Nakheel, the property developer that doubled Dubai’s coastline with man-made islands, and DP World, the international marine terminal development and operations business. Sheikh Mohammed gets involved in key strategic decisions for these businesses (Nakheel’s official corporate mission is to carry through his vision) and select tactical matters as well (he personally chose the insignia and color schemes for Emirates Airlines).

Is that too much power, primed to be abused, in one chosen man’s hands? It certainly is enough to make an American-educated professional like myself very nervous.

The effects of the global economic crises aside, how is it that such a strictly directed economy managed to enjoy real gross domestic product growth of more than 8% a year between 2001 and 2006, one of the highest rates in the world? How did it manage to grow exports by an average of more than 28% annually between 2003 and 2008? Why did education, health and social development in Dubai continue to improve? Why haven’t the rulers of Dubai simply amassed wealth and power for themselves at the expense of their nation, like so many other autocrats?

Neither democracy nor limited control ensures responsible leadership. After all, unilaterally powerful chief executives often make decisions in the best interest of their companies, and elected congressmen and senators often make terrible moves. The right governing or executive system can provide a good environment for good leadership, but the right seeds need to be sown first.

Sheikh Mohammed’s grandfather, Sheikh Saeed, a deeply religious man, formed an advisory council to give ordinary citizens a way to become involved in executive decision making and to keep his own powers in check. He also diversified Dubai’s economy by developing local commerce and trading posts, so that the state could prosper without depending on its limited natural resources. Sheikh Rashid, Sheikh Saeed’s son, spent hours at a stretch listening to everyday citizens’ concerns and requests as he propelled Dubai toward economic prosperity. The leadership principles of the Al Maktoum ruling family can be traced back to the teachings of Islam–if not to a side of Islam we see much of today.

Abu Bakr, the first Muslim caliph (i.e., the first successor to the prophet Mohammed and leader of the Islamic faith), said in his inaugural speech, in the seventh century, “I have been given the authority over you, and I am not the best of you. If I do well, help me, and if I do wrong, set me right. Loyalty is nothing but a sincere regard for truth; treachery is nothing if not disregard for truth.” Sheikh Mohammed, then, has seemed simply to be doing his part in driving the cultural values and family legacy forward, much like the Tata successors in India, or the chief executives of
General Electric
carrying the weight of and wanting to live up to their grand legacies and responsibilities. Luckily, what the historic legacy has demanded of Dubai’s rulers has been service and results more than power and obedience. “I have a vision,” Sheikh Mohammed has said. “I look to the future, 20, 30 years. I learned that from my father. … I follow his example.”

He also has said, “The biggest war that any country can engage in is that of development. … Let our victims be poverty, ignorance and backwardness. If the cart is politics and the horse is the economy, then we have to put the horse before the cart and not the other way around.” Sheikh Mohammed has, like his forefathers, chosen business as the means of achieving social improvement in his state. Dubai’s leaders have kept the entrepreneurial fires burning by taking on seemingly impossible feats (erecting the world’s tallest building, building an indoor ski resort), being energized rather than discouraged by constraints (doubling the size of its tiny island by creating new artificial land) and staying agile, efficient and nimble–strengths any venture capital firm looks for in a start-up. The curious fact is that by going after real business and economic accomplishments, rather than milking finite natural resources or relying on foreign assistance for growth, Dubai’s leaders have created a model for development like that of a for-profit business. They’ve achieved a rate of growth not possible from aid or oil and combined bold vision with smart means to create a virtuous, self-fulfilling cycle of rapid development.

Dubai had a strong pearl-diving industry that went into a steep decline in the early 1900s, overwhelmed by a depressed global economy and the introduction of cultured pearls in Japan. When that happened, Sheikh Saeed, Sheikh Mohammed’s grandfather, invited foreigners onto his soil to help diversify the economy by developing local commerce and trading ports. In the 1950s gold traders looking to sell to the Indian subcontinent started to establish a base in Dubai, and Sheikh Rashid, Sheikh Mohammed’s father, welcomed them. He rushed to build up the state’s infrastructure to prepare the potential economic growth. In 1985 oil contributed half of Dubai’s GDP; today it makes up just 5%, thanks to industries created with the help of foreign labor and investments. Today foreigners are 83% of the local population; Emiratis are a minority of 17%.

Strategic globalization has not only made Dubai’s meteoric rise possible but has also positioned the emirate as an alternative voice against rising Islamic fundamentalism. After the Sept. 11 attacks Sheikh Mohammed donated $5 million of his own money to assist the victims, and he took the opportunity to call for “peaceful coexistence between all religions and sects.” No question, peaceful coexistence is not only great for business but also necessary for Dubai’s continued development.

The strong legacy of Dubai’s leadership for more than a century has led the state’s current heads to set grand, ambitious goals and build a self-propelling economic system that leverages global commerce opportunities to turn those goals into reality. However, whether Dubai’s citizens, shrunk to a minute minority in their own state, appreciate all that commercial development or would prefer a simple desert life; whether they welcome the herds of us Pakistanis, Indians, Europeans and Americans on their soil, toiling away not only to better our own lives but also their state; or if they want us all to go back to where we come from–that is all another question.

For me personally, Dubai’s dizzying progress seems to have turned the state into a lifeless artificial island where the natives have grown tired of the never-ending flow of guests and visitors. I found that it simply didn’t feel like a warm, living, breathing community I could set roots in. Fortune must come with a price. Nevertheless, when I am in Pakistan, amid corruption, poverty and violence, or in Saudi Arabia, with no freedom to be myself, or in the United States, my chosen home, where business and government are theoretically kept separated and too much political or executive power makes us nervous, I find that perhaps there are some lessons we can take from this curious little state.

Umaimah Mendhro, along with Tony Mayo and Nitin Nohria at Harvard Business School, conducted research on Sheikh Mohammed of Dubai for an HBS case study to be published this year. Umaimah resides and works in Seattle.